Newspaper article The Journal (Newcastle, England)

Manufacturing Prices Hit by Soaring Costs of Oil; in Association with RBS

Newspaper article The Journal (Newcastle, England)

Manufacturing Prices Hit by Soaring Costs of Oil; in Association with RBS

Article excerpt

Byline: Iain Laing

INFLATIONARY pressure appears to be peaking as new reports show official factory gate prices rising at their fastest rate since records began but producer cost pressures easing for the first time in a year.

The Office for National Statistics said manufacturers' output - or selling - prices jumped 0.4% in July to hit an annual inflation rate of 10.2%.

This is the largest rise since the survey began in January 1986, and was largely down to soaring oil prices which peaked at EUR147 a barrel last month before retreating sharply in recent weeks.

Input price inflation for materials and fuels - the costs manufacturers face themselves - fell between June and July to 30.1%, the first dip in 12 months.

Paul Dales at Capital Economics said the figures suggested that inflationary price pressure "may be close to a peak".

Rising petroleum costs contributed exactly a third of the 10.2% annual factory gate price rises to July. They were up 35.2% year-on-year, the survey showed.

Food inflation also played a significant role, weighing in nearly a fifth of the rise, and hitting 11.6% last month.

Other big rises came from tobacco and alcohol products, 7.2% up on the year, and metal products, which rose 5.6%.

The ONS said the fall in input prices between June and July was partly down to a fall in fuel prices, although crude oil and chemical prices were higher month-on-month.

The annual rate for input price inflation has been rising steadily since July 2007, when it was just 0.6%. This has been largely down to soaring oil costs, which are 79.3% more expensive year-on-year for producers, the ONS figures show.

Dales said: "Admittedly, producers' raw material costs are still rising at extremely rapid rates. But the recent sharp falls in oil, wholesale gas and food prices suggest that price pressure right at the start of the inflation pipeline may be close to a peak."

He added that while policymakers at the Bank of England will still be on guard for signs that the rises in pipeline prices are feeding into the high street for some months yet, "there is at last some light at the end of the inflation tunnel". …

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